Here’s how Jindal’s privatization works: OGB fund balance to be broke by fiscal year ’15 after $500M balance in 2012

To probably no one’s surprise except a clueless Gov. Bobby Jindal, the takeover of the Louisiana Office of Group Benefits (OGB) by Blue Cross Blue Shield of Louisiana 18 months ago has failed to produce the $20 million per year in savings to the state.

Quite the contrary, in fact. The OGB fund balance, which was a robust $500 million when BCBS took over as third party administrators (TPA) of the Preferred Provider Organization (PPO) in January of 2013, only 18 months later stands at slightly less than half that amount and could plummet as low as an anemic $5 million a year from now, according to figures provided by the Legislative Fiscal Office.

OGB is one of the main topics to be taken up at today’s meeting of the Joint Legislative Committee on the Budget (JLCB) when it convenes at 9 a.m. at the State Capitol.

OGB is currently spending about $16 million per month more than it is collecting in revenue, said Legislative Fiscal Officer John Carpenter.

The drastic turnaround is predicated on two factors which LouisianaVoice warned about two years ago when the privatization plan was being considered by the administration:

Jindal lowered premiums for state employees and retirees. That move was nothing more than a smokescreen, we said at the time, to ease the state’s share of the premium burden as a method to help Jindal balance the state budget. Because the state pays a percentage of the employee/retiree premiums, a rate reduction would also reduce the amount owed by the state, thus freeing up the savings to patch gaping holes in the budget.

Because BCBS is a private company, it must return a profit whereas when OGB claims were processed by state employees, profits were not a factor. To realize that profit, premiums must increase or benefits decrease. Since Jindal had already decreased premiums, BCBS necessarily found it necessary to reduce benefits.

That, however, still was not enough and the negative income eroded the fund balance to its present level and now legislators are facing a severe fiscal crisis at OGB.

And make no mistake: this is a man-made crisis and the man is Bobby Jindal.

In a span of only 18 months we have watched his grandiose plans for OGB and the agency’s fund balance dissolve into a sea of red ink like those $250 million sand berms washing away in the Gulf of Mexico in the wake of the disastrous BP spill.

There is no tactful way to say it. This Jindal’s baby; he’s married to it. He was hell bent on privatizing OGB and putting 144 employees on the street for the sake of some hair-brained scheme that managed to go south before he could leave town for whatever future he has planned for himself that almost surely does not, thank goodness, include Louisiana.

So ill-advised and so uninformed was Jindal that he rushed into his privatization plan and now has found it necessary to have the consulting firm Alvarez and Marcel, as part of their $5 million contract to find state savings, to poke around OGB to try and pull the governor’s hand out of the fiscal fire. We can only speculate as to why that was necessary; Jindal, after all, had assured us up front that the privatization would save $20 million a year but now cannot make good on that promise.

In the real world, the elected officials are supposed to be the pros who know that they’re talking about while those of us on the sidelines are mere amateurs who can only complain and criticize. Well, we may be the political novices here, but the results at OGB pretty much speak for themselves and we can rightfully say, “We told you so.”

Are we happy or smug? Hell, no. We have to continue to live here and raise our children here while Jindal will be taking a job with some conservative think tank somewhere inside the D.C. Beltway (he certainly will not be the Republican candidate for president; he isn’t even a blip on the radar and one former state official now residing in Colorado recently said, “No one out here has ever even heard of him.”)

In a five-page letter to JLCB Chairman Rep. Jim Fannin (R-Jonesboro), Carpenter illustrated the rate history of OGB going back to Fiscal Year 2008 when premiums were increased by 6 percent. The increase the following year was 3.7 percent and the remained flat in FY-10. In FY-11, premiums increased 5.6 percent, then 8.1 percent in FY-12 when the system switched from a fiscal year to calendar year. but in FY-13, the year BCBS assumed administrative duties, premiums dropped 7 percent as Jindal attempted to save money from the state’s contributions to plug budget holes. For the current year, premiums decreased 1.8 percent and in FY-15 are scheduled to increase by 5 percent.

Carpenter said that since FY 13, when BCBS took over the administration of OGB PPO claims, OGB’s administrative costs began to shift to more third party administrator (TPA) costs as the state began paying BCBS $23.50 per OGB member per month. That rate today is $24.50 and will increase to $25.50 in January of 2015, the last year of the BCBS contract.

That computes to more than $60 million per year that the state is paying BCBS to run the agency more efficiently than state employees who were largely responsible for the half-billion-dollar fund balance.

29 Responses

Profits are the answer to privatization, companies/businesses won’t take on a responsibility like Group Benefits, ORM or anything else to break even, they only do it for a profit. Jindal is trying to bury Louisiana and has almost succeeded. By the time he’s gone, he may have achieved that goal!!!

If something happens to OGB where they cannot offer state employees and retirees insurance, there will be a large number of lawsuits against the state. We all put in our time and should have insurance that is rightfully ours.

If they were to present a comparison it would likely make little sense, and would be reported by the mainstream press however the administration chose to spin it.

Earlier this week, the AP reported on a complicated spreadsheet DHH presented that was supposed to show the “savings” from privatization of charity hospitals. This very spreadsheet shows INCREASED costs of $90 million year-to-year. However, the AP reported [at the obvious direction of DHH] the least meaningful number on the spreadsheet and claimed it showed $52 million in savings in the current year. EVERY number on the spreadsheet is likely to change, particularly the one they reported as “savings” and, as I say, it was the least meaningful number on the sheet for reasons they actually reported if the reader had even a little budgetary knowledge. Confusing? Misleading? Absolutely.

The demise of the OGB reserves was easy to predict. We might have thought it would take a little longer, but we all knew it was going to happen. The shell game played with it was even more egregious than the draining of other funds and now all of us participating are worried.

The house of cards built on fiscal and other practices of this administration continues to fall. Will the last one fall before Governor Jindal can leave office?

“Jindal will be taking a job with some conservative think tank somewhere in the D.C. Beltway” I hope so, as his ideas will be corralled in a tank and he will no longer be able to impact our state. Most ideas in D.C. think tanks stay there.

It seems there was never a fund of any kind Jindal didn’t salivate over and conspire to raid to put into the regular operating budget and/or into the hands of corporatists. We knew this OGB insurance reserve was no different; I just didn’t know whether the beneficiary would be the budget (and perhaps more corporate welfare) or would go directly into BCBS’s coffers. Looks like it was both.

Tom, I am glad to receive this from LA Voice. I have not received anything from you in months. I have depended on you to receive a honest take on Jindal and what he is up to. Please continue to include me on your email list. My husband and I are both retired state employees and are very much interested in what is going on. Thank you.

Correct me if I’m wrong but BCBSLA doesn’t set any benefits for OGB plans, OGB does. OGB determines all benefits that state employees receive. I complete disagree with the privatization of OGB, but I don’t believe BCBSLA really deserves blame. It is all Jindal, for reducing premiums.

“…that since FY 13, when BCBS took over the administration of OGB PPO claims, OGB’s administrative costs began to shift to more third party administrator (TPA) costs as the state began paying BCBS $23.50 per OGB member per month. That rate today is $24.50 and will increase to $25.50 in January of 2015, the last year of the BCBS contract.

That computes to more than $60 million per year that the state is paying BCBS to run the agency more efficiently than state employees who were largely responsible for the half-billion-dollar fund balance.”

This is fraud and theft by conversion, plain and simple. We state employees/taxpayers paid our premiums, a proper and healthy fund balance was accrued and fairly paid public employees performed well. Now, theft and $$ going into private pockets. Any guess how much has gone into Piyush’s? Since conservatives like to sue people when they don’t get their way, they won’t mind when we state employees bring a class action suit to recover this money. Too bad we can’t also file criminal charges – is anyone listening? Criminal charges.

OGB does set the benefits, BUT the point was that before privatization, OGB was offering comprehensive healthcare benefits at a good price and was able to run the system efficiently enough to maintain a large fund balance. When BCBS took over, because they are a for-profit company, they weren’t able to offer the same benefits at the same price. Jindal lowered premiums to pull the wool over the eyes of legislators who questioned the move – his claim was that BCBS could offer the same program at a lower price and even save the state money – so the leges agreed. Meanwhile the fund balance that state-run OGB had maintained was siphoned off to BCBS for their “kickback” – essentially their profit.

My question is will any legislator have the backbone to stand up and say “this privatization isn’t working. Bring back state-run OGB”? Or, will they let this money drain and erosion of benefits continue? We don’t need A&M to tell us this isn’t in the best long-term interest of the state or its workers. We need real leaders who will protect this state from any more of this megalomaniac’s “good ideas” instead of hiding behind his skirt and pointing fingers when the real results come to light.

Mike Foster owes this state an apology for springing this little worm of a man onto the state political scene. Does Piyush’s incompetence know any bounds? And sadly, does the Louisiana electorate’s incompetence know any bounds?

“Johnson and McIlwain agreed that the privatization was not the culprit in the diminishing reserves but rather an intentional act by the administration when it reduced premiums.”

If we lose Marsha Shuler as an ADVOCATE reporter, we may as well all get parakeets and put it to secondary use. It also makes a pretty good weed stopper in the garden and table topper for crawfish boils and fish fries.

Who cares? “Real private jobs?” Are you sure you don’t work for Jindal or Mitt Romney or Ted Cruz? Your painting all state employees with a single broad brush only displays your ignorance and bigotry.

The next time you need a cop or a fireman or you call to report child abuse or apply for social security or apply for Medicare or renew your driver’s license or put your child on a school bus to send him or her off to a public school or call to have a pothole repaired on your street, who the hell do you think you call? (hint: it isn’t Jindal.)

These people you describe as leeches are your neighbors, perhaps even your relatives. They work for a living the same as you (if you do work, that is) and some even put themselves in harm’s way to protect you and me to pay their mortgages, tuition, car payments and they have the same worries and concerns as you and I.

You are lumping all public employees in with the Jindals and the Heberts and other elected and appointed officials I have singled out as taking advantage of all of us by abusing the system that is supposed to work for us, but doesn’t.

If you want a scapegoat, look at the incredible tax breaks given to business and industry and at the tax loopholes the wealth use to dodge taxes that you and I (and rank and file public workers) are required to pay to make up for their dodging taxes.

If they would pay their fair share, the taxes you and I pay would be less but you apparently buy the Republican line that the wealthy are job creators when in reality those jobs are in Bangladesh, Indonesia, India and China.

I am approving your comment for posting but only to illustrate that there are many like you out there who are quick to criticize without taking into consideration how much we rely on these public servants.

Thank you Tom for telling it like it is to Capitalism who has probably no friends, life or business in Louisiana. They may be one of Jindal’s out of state contractors; make money here then leaves to spend their money out of state. Or maybe live on the compound where they never pay for anything and can’t leave the state quick enough. Undoubtedly they never started at the bottom of the pole and worked 30 years to get at least out of poverty before dying. Who cares? State employees care and being able to vote against someone who doesn’t care is what liberty and freedom is all about and at least 99% are honest individuals and can sleep at night without worrying if they are going to hell because of their actions. Leeching has never occurred to me but supporting private businesses is a daily occurrence to at least 95% of us. If I knew this person’s business or company I would never support it again for surely you don’t need my hard earned money nor do I need your business.

Mr. Capitalism obviously never worked for a government, hence he has no idea of the dedication the vast majority of government employees have to serving people of their city, parish, state or federal government. Serving people is their motive, not profit. My guess is he wouldn’t be able stand the scrutiny and all the red tape government employees have to follow and put up with. I worked as a government employee for 13 years at LSU and another 20 years with the U.S. Forest Service and I would put the employees of both organizations up against any private company and come out a winner. Mr. Capitalism should recognize that every time he goes to the cash register of a private business, he pays for the vast sums of money that private employees and private company CEOs leach for themselves, not to mention all the taxes the companies avoid paying which is leaching off we citizens.

[…] Another health system floundering under the Jindal Administration’s mismanagement is the “Office of Group Benefits” (OGB). This agency runs the health insurance for thousands of state workers throughout Louisiana. OGB was one of the most efficient parts of Louisiana government, earning taxpayers a surplus of $500m to shield exposure against downturns or unexpected health costs. Unlike many public pensions and health care systems, OGB was successfully limiting taxpayers from any exorbitant costs. This made the agency a ripe target of an irresponsible administration focused on gimmicks to balance a broken budget. In 2011, after contracting Goldman Sachs to do an analysis of the system for a cool $6m, the Jindal Admin schemed to privatize the office. When the manager in charge of OGB refused to go along with the scheme, he was promptly fired. […]

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